Markets closed at or close to session lows immediately, with the Nasdaq as soon as once more underperforming and the small-cap Russell 2000 outperforming the opposite main indices. We’ve seen surprising energy in sure areas of late — Bitcoin and Japanese buying and selling homes (because of Warren Buffett’s latest investments), to call a pair — and in any other case feeling some altitude illness in areas like Tech; the Nasdaq stays +15% 12 months so far.
Frankly, we’re prepared to listen to from the March Client Worth Index (CPI) report tomorrow morning. Nothing strikes till these numbers come out. Month over month, analysts anticipate +0.2% on headline — half of the +0.4% reported for February and +0.5% in January. Actually, one other print in optimistic territory would mark the third-consecutive month-to-month improve in headline CPI, one thing we haven’t seen in virtually a 12 months. Core CPI is anticipated to dip 10 foundation factors (bps) to +0.4% month over month.
The Inflation Charge, aka “non-core CPI 12 months over 12 months,” is positioned to land sub-6% for the primary time in 18 months tomorrow; the February print was an excellent +6.0%. This determine has descended in every of the previous eight months, by a mean of practically -0.4% — which is what the February put up relative to January was. We solely noticed a steeper, extra extended slide previously 20 years again throughout the Nice Recession; even the Covid drop within the Inflation Charge was briefer. This can be a wholesome signal — 2022’s +8.6% CPI was the best since +10.3% in 1981.
For the core aspect (stripping out unstable meals and power costs), CPI 12 months over 12 months has already come down 110 bps since 40-year highs reached in September of final 12 months, from +6.6% to +5.5%. We’ve come down every month for the final 5, although solely by 10 bps in every of the final two prints. This may occasionally point out one thing of a resistance degree in core CPI, or it might point out an even bigger drop is due. In any case, we’ve seen incremental drops in different inflation knowledge over the previous few months which finally dropped deeper, virtually as if it had gotten “caught.” Maybe we’ll see the identical factor tomorrow, maybe not.
Maybe then we’ll additionally cease plodding alongside and get someplace significant in April buying and selling. We’re flat-to-down thus far to start out calendar Q2, with most everybody ready for the CPI shoe to drop. After that, we’ll see some additional colour with Producer Worth Index (PPI) numbers out Thursday, and Retail Gross sales, Import Costs, Industrial Manufacturing and Capability Utilization outcomes all on Friday. As well as, the primary of the massive banks report Q1 earnings that morning, as nicely. So buckle up — the week is nearly to get fascinating.
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